5 Ways to Kick Your Spending Habit
Jul 13, 2011 14:01:11 GMT -5
Post by PrisonerOfHope on Jul 13, 2011 14:01:11 GMT -5
This is a good article from Woman's Day magazine; it applies to men as well as women:
5 Ways to Kick Your Spending Habit
Learn how to plug the money drain—and save hundreds in return
By Dayana Yochim Posted July 05, 2011 from Woman's Day; August 1, 2011
Have you ever taken a wad of cash and simply flushed it down the toilet? I doubt it! Yet that’s basically what we do whenever we spend our money without thinking about it, never stopping to calculate the underlying costs of our habits. Read on to see which of these common mistakes you’re making, and how to plug the leak so your hard-earned cash doesn’t keep swirling down the drain.
Falling for a “Sale”
Talk about markdown madness: What else would you call spending money in order to save money? Yet even the thriftiest shopper can be swayed by strategically placed signs, carefully worded sales pitches and cleverly designed displays. The cost of bagging an impromptu bargain? An average of $108, according to a 2009 ShopSmart magazine poll that asked women how much they spent on their most recent impulse purchase.
The Fix: Don’t swing at every sales pitch that comes your way. In particular, watch out for these:
“Buy in bulk and save”: Bigger is not always a better deal. The truth is in the cost-per-unit price, usually spelled out on the store tag. If it’s not, the math is easy to do: Divide the price of the item by the number of units in the package. Do the math for both the regular size and bulk, and you’ll have the answer.
“Buy one, get another at a discount”: Pricing consultants call this tactic nonlinear pricing, whereby the more you buy the less you pay per item. Or so it appears. Often the store’s profit is already buried in the promotional price. Take a minute to compare the per-item/per-unit price with items that aren’t part of the promotion to see if the “deal” really is a deal.
“Limited time only”: This strategy is often used to move items that are about to expire. Before you toss it into the cart, check the label to make sure it—and the money you’re spending—won’t just end up in the trash.
“Buy X, get Y for free”: Too many of us assume “free” means “good value” and then pay the price for failing to take a second look. For example, in a study by behavioral economist Dan Ariely, author of Predictably Irrational, mall shoppers were offered a free $10 Amazon gift certificate or a $20 certificate for $7. Most went for the $10 freebie, even though the latter deal was worth $3 more. Moral of the story: If something is “free,” scrutinize the offer more than usual, not less.
Popping the Priciest Prescriptions
Those pharmacy copayments may seem like a small price to pay for your family’s well-being. But coughing up $10 to $45 or more per prescription adds up—to more than $300 out-of-pocket a year for the average consumer, according to the Agency for Healthcare Research and Quality, the research arm of the U.S. Department of Health and Human Services. Costs can be even higher if you’re on maintenance medications (drugs for conditions that require ongoing treatment, such as high cholesterol or allergies). By automatically refilling your pillbox month after month, you may be racking up unnecessary costs on prescription copays.
The Fix: Don’t assume that your copayment is set in stone. Most health plans offer tiered benefit packages, with copayments based on the cost (or brand) of the drug prescribed. You can get an A-to-Z rundown of drugs and rates of coverage—your plan’s “preferred brand” or “formulary” list—through your plan provider. Give that list to your doctor. Or ask if she can write your next prescription to allow for a generic substitution. Generic medications come with the cheapest copay, averaging $10 a pop, according to a 2009 Kaiser Family Foundation survey. If a no-name brand isn’t available (or if the generic version is not recommended), the next best thing is a drug on the “preferred” list (average copay $27 versus $46 for non-formulary brands). How much can you save by reevaluating your medications? More than $400 a year.
Caving in to the “I Want”s
When the only thing standing between you and the checkout aisle is your child loudly begging you to buy the candy bar, glow-in-the-dark pen or other strategically placed teaser, a few bucks may seem like a small price to pay to finish your errands sans meltdown. Or is it? Spending $1.99, $3.29 and $5.19 once a week on sparkly stuff that ends up wedged under the car seat can add up to hundreds of dollars a year.
The Fix: Stand in front of the mirror and practice saying these three money-saving words: “Not today, honey.” Again, firmly and unflappably. If you want to avoid the role of spending police, give your child purchasing control by putting him on a weekly allowance. Explain in advance what you’ll pay for and what’s his responsibility, and make his portion enough to cover routine “I want”s. Watch in amazement as he becomes much more thoughtful about spending his money.
Using Plastic to Rack Up Rewards
Convenience, consolidated spending, easy tracking, earning points…it’s hard to deny the benefits of credit cards. But there is one harmful side effect of plastic: We spend more when we use it. A study by researchers at MIT’s Sloan School of Management found that people offered the option of paying for a purchase with a credit card were willing to spend up to 100% more for an item than those who were told they could only pay in cash. That’s because credit cards delay the sense of having spent money until the monthly statement arrives. And it’s even worse with cards that reward spending (via points, cash back, miles or other perks). A Federal Reserve Bank of Chicago study found that people spent more ($79 a month more) and racked up more debt ($191 a month more) after they enrolled in a cash-back rewards program than they did when they used a non-rewards card.
The Fix: Don’t be wooed by a credit card’s points and perks. Rewards credit cards carry higher interest rates than regular cards (17.48% versus 16.82%, according to IndexCreditCards.com), often charge an annual fee, limit rebates and have strict rules on what you can earn. Flip on the fluorescents and take a closer look at the fine print—be sure you understand the actual terms, conditions and costs of your card. Unless you pay off your balance in full every month, only buy what you would regardless of payment method, and actually use the rewards you earn, there’s a pretty good chance that the card’s not worth it. Photo: iStockphoto
Shopping Without Thinking
Where, oh where did that $1,092 go? That’s the amount that the average shopper cops to losing track of over the course of a year, according to a 2009 survey commissioned by Visa, Inc.
The Fix:
• Carrying only the amount of cash you want to spend. And no cheating by hitting up the ATM or putting a purchase on plastic.
• Write down every penny you spend during the day—it’s always
an eye-opener.
• Choose retail-free social activities. Leisure shopping is where 32% of respondents said their mindless spending bouts occur.
• Fight the impulse. Stick to your shopping list, especially when you’re at the grocery store. Of the people polled, 34% said their spending stupors commonly take place at
the supermarket.
www.womansday.com/Articles/Life/Money/5-Ways-to-Kick-Your-Spending-Habit.html?zeta_mid=HFM2_490066&zeta_rid=80409642
5 Ways to Kick Your Spending Habit
Learn how to plug the money drain—and save hundreds in return
By Dayana Yochim Posted July 05, 2011 from Woman's Day; August 1, 2011
Have you ever taken a wad of cash and simply flushed it down the toilet? I doubt it! Yet that’s basically what we do whenever we spend our money without thinking about it, never stopping to calculate the underlying costs of our habits. Read on to see which of these common mistakes you’re making, and how to plug the leak so your hard-earned cash doesn’t keep swirling down the drain.
Falling for a “Sale”
Talk about markdown madness: What else would you call spending money in order to save money? Yet even the thriftiest shopper can be swayed by strategically placed signs, carefully worded sales pitches and cleverly designed displays. The cost of bagging an impromptu bargain? An average of $108, according to a 2009 ShopSmart magazine poll that asked women how much they spent on their most recent impulse purchase.
The Fix: Don’t swing at every sales pitch that comes your way. In particular, watch out for these:
“Buy in bulk and save”: Bigger is not always a better deal. The truth is in the cost-per-unit price, usually spelled out on the store tag. If it’s not, the math is easy to do: Divide the price of the item by the number of units in the package. Do the math for both the regular size and bulk, and you’ll have the answer.
“Buy one, get another at a discount”: Pricing consultants call this tactic nonlinear pricing, whereby the more you buy the less you pay per item. Or so it appears. Often the store’s profit is already buried in the promotional price. Take a minute to compare the per-item/per-unit price with items that aren’t part of the promotion to see if the “deal” really is a deal.
“Limited time only”: This strategy is often used to move items that are about to expire. Before you toss it into the cart, check the label to make sure it—and the money you’re spending—won’t just end up in the trash.
“Buy X, get Y for free”: Too many of us assume “free” means “good value” and then pay the price for failing to take a second look. For example, in a study by behavioral economist Dan Ariely, author of Predictably Irrational, mall shoppers were offered a free $10 Amazon gift certificate or a $20 certificate for $7. Most went for the $10 freebie, even though the latter deal was worth $3 more. Moral of the story: If something is “free,” scrutinize the offer more than usual, not less.
Popping the Priciest Prescriptions
Those pharmacy copayments may seem like a small price to pay for your family’s well-being. But coughing up $10 to $45 or more per prescription adds up—to more than $300 out-of-pocket a year for the average consumer, according to the Agency for Healthcare Research and Quality, the research arm of the U.S. Department of Health and Human Services. Costs can be even higher if you’re on maintenance medications (drugs for conditions that require ongoing treatment, such as high cholesterol or allergies). By automatically refilling your pillbox month after month, you may be racking up unnecessary costs on prescription copays.
The Fix: Don’t assume that your copayment is set in stone. Most health plans offer tiered benefit packages, with copayments based on the cost (or brand) of the drug prescribed. You can get an A-to-Z rundown of drugs and rates of coverage—your plan’s “preferred brand” or “formulary” list—through your plan provider. Give that list to your doctor. Or ask if she can write your next prescription to allow for a generic substitution. Generic medications come with the cheapest copay, averaging $10 a pop, according to a 2009 Kaiser Family Foundation survey. If a no-name brand isn’t available (or if the generic version is not recommended), the next best thing is a drug on the “preferred” list (average copay $27 versus $46 for non-formulary brands). How much can you save by reevaluating your medications? More than $400 a year.
Caving in to the “I Want”s
When the only thing standing between you and the checkout aisle is your child loudly begging you to buy the candy bar, glow-in-the-dark pen or other strategically placed teaser, a few bucks may seem like a small price to pay to finish your errands sans meltdown. Or is it? Spending $1.99, $3.29 and $5.19 once a week on sparkly stuff that ends up wedged under the car seat can add up to hundreds of dollars a year.
The Fix: Stand in front of the mirror and practice saying these three money-saving words: “Not today, honey.” Again, firmly and unflappably. If you want to avoid the role of spending police, give your child purchasing control by putting him on a weekly allowance. Explain in advance what you’ll pay for and what’s his responsibility, and make his portion enough to cover routine “I want”s. Watch in amazement as he becomes much more thoughtful about spending his money.
Using Plastic to Rack Up Rewards
Convenience, consolidated spending, easy tracking, earning points…it’s hard to deny the benefits of credit cards. But there is one harmful side effect of plastic: We spend more when we use it. A study by researchers at MIT’s Sloan School of Management found that people offered the option of paying for a purchase with a credit card were willing to spend up to 100% more for an item than those who were told they could only pay in cash. That’s because credit cards delay the sense of having spent money until the monthly statement arrives. And it’s even worse with cards that reward spending (via points, cash back, miles or other perks). A Federal Reserve Bank of Chicago study found that people spent more ($79 a month more) and racked up more debt ($191 a month more) after they enrolled in a cash-back rewards program than they did when they used a non-rewards card.
The Fix: Don’t be wooed by a credit card’s points and perks. Rewards credit cards carry higher interest rates than regular cards (17.48% versus 16.82%, according to IndexCreditCards.com), often charge an annual fee, limit rebates and have strict rules on what you can earn. Flip on the fluorescents and take a closer look at the fine print—be sure you understand the actual terms, conditions and costs of your card. Unless you pay off your balance in full every month, only buy what you would regardless of payment method, and actually use the rewards you earn, there’s a pretty good chance that the card’s not worth it. Photo: iStockphoto
Shopping Without Thinking
Where, oh where did that $1,092 go? That’s the amount that the average shopper cops to losing track of over the course of a year, according to a 2009 survey commissioned by Visa, Inc.
The Fix:
• Carrying only the amount of cash you want to spend. And no cheating by hitting up the ATM or putting a purchase on plastic.
• Write down every penny you spend during the day—it’s always
an eye-opener.
• Choose retail-free social activities. Leisure shopping is where 32% of respondents said their mindless spending bouts occur.
• Fight the impulse. Stick to your shopping list, especially when you’re at the grocery store. Of the people polled, 34% said their spending stupors commonly take place at
the supermarket.
www.womansday.com/Articles/Life/Money/5-Ways-to-Kick-Your-Spending-Habit.html?zeta_mid=HFM2_490066&zeta_rid=80409642
